Members only? Or “Members Only” jacket?

A powerful component of customer engagement is providing scarce, exclusive and relevant experiences that reinforce your brand positioning.

“Members Only” or “By Invitation Only” marketing programs can be compelling messages that tell your customer that you truly appreciate their business.   For years leading luxury retailers such as Bergdorf Goodman and Barney’s have feted their best customers with private lunches, exclusive parties or access to fashion designer “meet and greets.”  More accessible retailers like J. Crew and Nordstrom use their loyalty programs to reward members with unique privileges such as free alterations, early notice of new merchandise arrivals or special shopping hours.  In all cases, the customer is granted access based upon some meaningful qualification, typically spending level or loyalty.

But another kind of marketing seems to be gaining momentum, and it’s best illustrated by the flash-sales sites such as GiltGroupe, HauteLook and BeyondTheRack.  These businesses are growing dramatically–RueLaLa recently reported that their sales doubled year over year–and one of their hooks is that their low prices are for “members only.”   So what does one have to do to qualify to be a member?  Having a legitimate e-mail address is just about all it takes.

In the early 1980’s “Members Only” jackets quickly became all the rage.  If you wanted the world to know how cool you were, a “Members Only” jacket gave you quick access to an exclusive club.  But it wasn’t long before just about everybody had one and what propelled the brand soon eviscerated it.

There is ample evidence that, for a while, you can get away with hooking customers with faux exclusivity.  But just because you can, doesn’t mean you should.  Deep levels of engagement and loyalty are not built on smoke and mirrors; rather they are built on forging relationships rooted in respect and trust.

Authenticity matters.

Does your marketing look more Members Only or more “Members Only” Jacket?

Seducing the “Promiscuous Shopper”

From my experience, every industry has customers that are not loyal to ANY brand.  I call these folks “promiscuous shoppers.”  They have strange seductive powers.   They look so appealing–and what’s more, when you show them a lot of attention, they are attracted to you, showering your brand with their business.

In many cases, these customers haven’t found the right fit.  Occasionally, it’s an awareness issue.  That is, “Mr. Right Brand” is out there somewhere, but they just haven’t discovered him yet.  In other instances, the customer is well aware of her choices,  but no one brand has yet convinced her that they deliver a value proposition worthy of her loyalty.  But there is also the reality that some customers just don’t want to settle down.  They are incapable of being loyal and they go from brand to brand, chasing whoever gives them the best deal.  This latter situation is the most vexing for many brands and the place where a lot of time and money is wasted.

Think of your own behavior.  If you are anything like me, you have brands that get a significant share of your wallet because your needs and wants are met in a highly relevant, unique–and sometimes remarkable–way.  Then there are other brands that get your business because they meet your wants and needs in an acceptable manner AND because they buy your business (free shipping! double rewards miles!).

So given that every industry has some percentage of promiscuous shoppers what’s the marketer to do?

First and foremost you need to understand what percentage of your revenue and profits (don’t forget the profit part!) comes from these retail harlots.  Ideally you would have detailed consumer research to help you nail this, but you can get a good estimate by noticing what percentage of your revenue comes only when you run a really hot deal.   If you are finding that unless you run an aggressive promotion you have a hard time driving the top line, and that the same customers buy on deal over and over again (I’m looking at you Macy’s!), it’s time to get worried–and to get to work on your customer strategy.

Second, among the customers whose behavior is highly activated by these promotions, what percentage have the potential to be loyal, profitable customers?  Next, what levers (beyond price discounting) can be pulled to engage them further and grow them into loyal, profitable customers?  This level of customer insight likely requires some primary consumer research, but the ROI can be enormous.

We all recognize that aggressive promotions are often necessary to acquire new customers, drive deeper levels of customer engagement or simply to turn inventory into cash.  But if this is done without a clear, well thought out customer growth strategy, the potential to get stuck with a significant percentage of your customer base that is fundamentally profit proof is high.

The bottom line is this: not all “promiscuous shoppers” are worth seducing.   Your job is to stop spending time and money on those without the potential to be loyal, profitable customers and start spending the time on those that do.  Easier said than done, but well worth the effort.